Zara’s owner reports surging sales despite cost of living pressures

The owner of fashion retailer Zara has reported surging sales and profits in the first half of the year, as consumer demand for new clothing remained strong despite cost of living pressures.

Inditex, which is Europe’s biggest clothing retailer with a portfolio of chains including Massimo Dutti, Pull&Bear, and Bershka, said profit for the six months to July had risen by 41%, hitting a new record. Sales increased by about a quarter and were up in all regions.

The company said revenue from February to the end of July rose to €14.8bn (£12.8bn) from €11.9bn a year earlier, an increase of nearly 25%, while it reported a net profit of €1.79bn.

The Spanish retail giant reported a bounceback in sales this spring, after shoppers flooded to its high street stores following the easing of Covid-19 restrictions.

Inditex’s chief executive, Óscar García Maceiras, said the company’s strong results were a result of “our unique fashion proposition, an increasingly optimised shopping experience for our customers, our focus on sustainability, and the talent and commitment of our people”.

He added the company had “great growth potential going forward”.

Inditex’s shares jumped by 5% in morning trade on the Madrid stock exchange following the results.

Amid growing cost of living pressures on consumers, Inditex said sales momentum had continued in recent weeks and its new autumn and winter clothing ranges had been well-received by customers.

Inditex said it expected to invest more than €1bn this year in growing its business, spending money on stores, its online sales platform and improving customer experience.

It is forecasting that online orders would account for more than 30% of all sales by 2024. Despite this, the company continued with its store expansion plans, and opened shops in 24 markets in the six months to July, taking the total number of outlets to 6,370.

In March, Inditex closed all 500 of its outlets in Russia – its second largest market in terms of shops – in response to the Kremlin’s invasion of Ukraine, which resulted in a €216m charge on the business.

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Wary of future supply chain issues, Inditex said it was holding more autumn and winter stock in its warehouses to make sure products remained available.

In May, Zara joined the ranks of retailers starting to charge shoppers for returning unwanted items, and introduced a £1.95 fee for online returns.

Victoria Scholar, the head of investment at online investment platform, interactive investor, said the company had not reported any significant impact from this change in policy.

She added that Inditex had “successfully passed through some of its cost increases to customers via higher prices at Zara in particular, without having a negative impact on demand”.